Ailment 11 – New Sheriff in Town Syndrome

You know the scenario. The new sheriff rides into town, wants to clean up and make a name for himself…most often leaving dead bodies in his wake.  In the movies the new sheriff is usually the good guy, as in Gary Cooper’s Oscar-winning turn in High Noon, and the bad guys become the dead bodies and it’s a happy ending. The good guys win, the bad guys lose.

Unfortunately, in the outsourcing world, the reverse is often the case. The New Sheriff in Town is really a gun slinging power hungry new executive looking to enhance his name and image; along the way he throws good-standing suppliers under the bus for the name of “lower costs” or “a new strategic direction.” The New Sheriff seeks short term gains to make him look good and then are often gone in a flash to the next company to repeat the situation.   Often the New Sheriff comes from the supplier and brings with them knowledge that can be used against the supplier – such as their margins.

The result? Once-loyal suppliers end up on the loosing end of a win-lose proposition. And if the supplier is lucky enough to stay an existing supplier, they definitely do not trust their customer as much after becoming victims of the New Sheriff.

I’ve seen this pattern played out so many times (and heard nightmares of why suppliers don’t trust buyers) that I’ve added the New Sheriff in Town Syndrome as the 11th Outsourcing Ailment (an addition to Vested’s 10 Ailments).

For a real time example of a New Sheriff in Town look no further than Randy Mott. Randy rode into GM recently as the newly-minted CIO — after stops along the way at Wal-Mart, Dell and HP (hmmm…see the pattern?).  Randy’s shake-up plan? Move some 90 percent of its outsourced IT services back in-house within three years.

The dead bodies in this case? GM’s Information Technology service providers – namely HP, IBM, Capgemini and Wipro – who stand to lose contracts valued at nearly $3 billion a year. And an interesting twist is that one of these suppliers – HP –was named GM’s Supplier of the Year just last year (and in 2010) for its “dedication and loyalty.” Some insiders at GM say HP contributed in helping GM bounce back from its recent bankruptcy; HP made significant investments in GM during their comeback to help it become more competitive.

Here is my point – and the rub. How is it that one day you are Supplier of the Year and the next day you are being ousted in the name of the new strategy?

Now I’d like to make one thing very clear. I am not passing judgment on Mott’s decision to bring work back in house. I clearly don’t know the business case. It might be the right thing and I am sure Randy will win fans with his insourcing plan. But a new job for GM is a job loss from HP, IBM, Capgemini and Wipro (two of which are US-based firms, while the Paris-based Capgemini has a major presence in North America).

What I am suggesting is that GM’s Mott is clearly displaying symptoms of the New Sheriff in Town Syndrome. GM has had a history of abusing its suppliers; making a supplier of the year irrelevant overnight simply because a New Sheriff rides into town likely won’t help build any friends among its suppliers.

I wish Randy well. But my prediction is that is that GM will end up outsourcing again in the future. And my bet is that HP certainly will raise its prices next time around.

Comments

  1. John M. Donnelly MS, C.P.M., CPIM says:

    This phenomenon has been occurring for a while now. Continuing with the GM history, think back to Mr. Lopez in Purchasing for GM. Many relationships and suppliers were destroyed in the name of lowest price. In the past ten years the idea of the “New Sheriff” is generally the new guy who in order to make a name makes short term decisions for immediate impact. Those results are generally rewarded in the form of a bonus, promotion or the “Sheriff” moves to a new town for more money, position, etc and does the same act all over again. The longer term effects are not seen or felt until the “Sheriff” is gone or some one else is in that position (a “Deputy”) who either continues the onslaught or takes the fall for the original decisions.

  2. Steve Fine says:

    Kate, great points and well stated . Having been that new sheriff several times along my career path I believe it takes a good bit of seasoning to best understand where, when and how to most appropriately, efficiently and effectively wield the power to change an environment. Not all change is good and often times it’s best to observe and learn adapting to the situation at hand rather than imposing ones preconceived notions of what the right path is for an organization.

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